State Bank maintains interest rate unchanged at 22%

The State Bank of Pakistan (SBP) has decided to maintain the status quo and keep the key policy rate unchanged at 22 percent!

The announcement was made after a meeting of the SBP’s Monetary Policy Committee (MPC).

According to a statement issued by the central bank on Thursday, this decision takes into account the latest inflation outturn reflecting the continuing declining trend in inflation from its peak of 38% in May to 27.4% in August 2023.

“Even though global oil prices have risen recently and are being passed on to consumers through adjustments in administered energy prices, inflation is projected to remain on a downward trajectory, especially from the second half of this year,” the state bank said.

In its press release today, the MPC notified that four key developments had taken place since its previous meeting in July. Among them were the improved agricultural outlook, rising global oil prices, current account deficit in July, and results of recent administrative and regulatory measures aimed at improving the availability of essential food commodities and curbing illegal activities in the foreign exchange market.

“.The MPC noted that it will continue to monitor the risks to the inflation outlook and, if required, it will take appropriate action to achieve the objective of price stability.

“At the same time, the MPC also stressed on maintaining a prudent fiscal stance to keep aggregate demand in check. This is necessary to bring inflation down on a sustainable basis and to achieve the medium-term target of 5pc–7pc by the end of FY25.”

MPC further noted that inflation was likely to increase significantly in September mainly due to the base effect and the adjustment in energy prices. However, it said inflation was expected to subsequently decline in October and maintain its downward trajectory from thereon.

The Monetary Policy Committee consists of ten members: the Governor (Chairman), three members of the Board, nominated by the SBP Board, three senior executives of the Bank, nominated by the Governor, and three External Members (economists) appointed by the Federal Government on recommendation of the SBP Board.